best in the industry. >> all right, thank you. thank you, larry. >> pleasure. thank you for having me. >> it was fun having both of you guys. >> it was. we need to do this more often. twice the conversation. that does it for us today. make sure you join us tomorrow. right now, it's time for "squawk on the street." good morning, welcome to "squawk on the street." i'm melissa lee along with carl quintanilla and simon hobbs live from the new york stock exchange. we'll take a look at how we're setting up on u.s. futures, this the day after the s&p posted its worst drop in about three months. we are looking higher on the dow jones industrial average but lower on the s&p 500 and nasdaq. we're taking your cue this morning from what is going on in europe. we are watching protests going in both spain as well as greece. red arrows across the board. take a look at the decline in germany, down about 1.9% this morning. our road map does start off in

europe. opening the way to possibly declare independence. bond yields will approach 6%. in greece, tens of thousands protest austerity measures there. >> stocks closed yesterday at the lows of the session. these comments from plosser, also throwing more cold water on the qe-3 rally. goldman sachs raising estimates on the heels of a blackberry jam conference. apple, meantime, continuing under pressure this morning. athens this morning, madrid, last night. the issues are the same in both cities. more cuts in government spending and higher taxes as they try to balance their budgets. michelle caruso-cabrera joins us this morning. ft calls this a step toward a full blown constitutional crisis

in spain. why now? >> absolutely. when it comes to spain, why now? there's going to be a new budget announced tomorrow. that's expected to have new austerity measures that many spanish citizens won't like. in greece, any day now we'll hear what new cuts they will be making there. this was scene in greece a little more than an hour ago as thousands of striking union members descended on the main square in athens in front of the parliament. once again, tear gas used to disperse the crowds. police beating some of the protesters who refused to move. at one point it looked like the national guard might go up in flames. things have calmed down. on to madrid last night, where thousands there surrounded the parliament there as well, chanted phrases like "let us in," "we want to evict you." police did use rubber bullets and we watch live as they beat some protesters. as you mentioned the constitutional crisis.

the situation in spain growing even worse because now there's this region in spain, catalonia, has announced there will be a referendum on whether or not they should secede from spain. this is an area that has long had an independence movement but now it's taken on much more strength, vigorous demonstrations in the capital of barcelona just last week. we look to see if and when the spanish government officially will ask for a bailout of some sort. those familiar with the thinking within the government say the prime minister is waiting the see how the markets react to the new budget announced tomorrow. b, how the markets react to the big announcement on friday about how much money their banks are going to need for recapitalization. what will his interest rates do? then he will decide from there. this whole issue of the independence movement in spain, think about this. the eu and the euro was supposed to be about european integration, and yet in spain it looks like it's threatening disintegration.

>> catalonia is sort of -- if there was a 1%, that's where they live, right? >> absolutely, that's barcelona. i will say this. they need a bailout. they went to the federal government of spain to get help. they spend crazy amounts of money as well. they seem to think that if they're independent, they can give less of their tax revenue to madrid, and that their borrowing costs would be lower. i'm not sure i believe that. but this has certainly given the politics there and the politicians there a way to really drive a lot of nationalist fervor. but the independence movement has been there a long time. one of the original terrorist groups in europe was the bast separatist movement. >> it's going to be really critical. you mentioned watching bond yields in terms of being able to refinance debt. there is a belief also that it could come in by months end. so that's going to make for some pretty interesting cross currents. >> yeah. i know there's a lot of interest in what the bond ratings agencies do. i'm not sure that it really has

that much of an impact. spain's interest rates rise and fall based on what bond traders think about them, not necessarily what the ratings agencies think about it. i know that it has to deal with whether or not you can hold certain kinds of debt within your portfolio, if you're a certain type of manager, but clearly, this is the last 24 hours or so in spanish yields. they've risen pretty dramatically in the face of the protests. >> can i just pick up on that? because i love a bit of -- a good story goes a long way. can we look at what actually that shot shows that. is not a huge spike. >> i agree. >> you've gone from 5.67 to 6.01. i make the point because i think today -- i think this is as important as all the things you've just said. today is two months exactly to the day since draghi said he would do everything required to save the euro. during that period of time, we've experienced a very strong rally. european stocks are up 12%.

the s&p is up 6% to 7% in that time because the fed has shown some action. this is simply an indication that now you might want to book some profits on that rally. the situation in europe has not dramatically changed over the last 24 hours. for those of us that are european, i've been holidaying in barcelona for 25 years. the fact that catalonia has wanted independence is not new to any european. we've known that all the way through. we know that at times of stress, those independent voices are going to be louder and more shrill. it doesn't mean that catalonia is about to secede. the same as when i was growing up, it doesn't mean that the bast country was about to succeed either. not a lot has changed. >> i'll give you all of that, simon. the only point i would make about the rising yields is -- you're right, there's been a tremendous rally since draghi made his announcement, right? and then people who have real money at stake in the last 24 hours have made some changes.

dramatic? no. but it's the first reaction. and it's a flag to say there's nervousness here and if ever there was a moment to talk about whether or not you're going to have a real secession crisis, it is a secession crisis. >> where is the over under? you mentioned rajoy is watching the markets to see how they react. if they are at six and we did top out at seven and a half in july, what is the new danger zone? >> look, i've had people tell me that spain can live on 8% if they really wanted to, but it would just be extremely tough. they've have to make deeper, tougher, sooner budget cuts. i think the over under on whether he asks for help -- i think he's asking for help 100%. remember, his bond yields went down based on the presumption that draghi was going to buy them. if draghi can't buy them until he asks for help, he has to ask

for help. it's this crazy catch 22. i think he's trying to buy time. so would i. you don't want to ask for help before you need to. >> there is a suggestion they might do it together, have you heard that? >> no, i've heard he's waiting for elections to finish in various parts of the country. what i've heard more about the thinking is what happens to interest rates and how long can they -- if they stay low, then don't bother. >> michelle, we're talking about it once again. thanks so much for helping us out. meantime, the impact is being felt here. the s&p 500 posted its worst day in three months. the nasdaq, it's worst day. where do we go from here? seems like we don't care about europe, you look aside, look away until the protests hit the

street and all of a sudden the markets are rattled. >> it's almost replaying a tape from 26 months ago when we saw the same footage in athens and it's a big concern. we had a bit of a pullback yesterday. partially sparked by plosser. partially sparked by ecb. we're not going to reduce or eliminate the greek debt, so forget about that. it's still on the table. these people still need to be concerned with what they're committed to. that means more austerity. that's not very good for us here. everything was going nice and smooth. draghi got up in the middle of the summer and was orchestrating a nice little run-up in the market. all of a sudden somebody in the horn session plays a sour note, market needs to pull back. >> can you separate the plosser and the protests from run of the mill quarter end positioning? >> i think everybody's a little kardashianed right now. you want to have a strong

finish, but all of a sudden you get concerned, you don't want to be the only one running. >> there's a naivety to this. there was an article in talking about why we fell off. inves toors question whether the fed's bond buying initiative will bolster the economy. when we announced qe-3, those were exactly the conversation we were having on the point, but still the market rallied and later on down the line, you rationalize it as the initial event wasn't so powerful. now we're doing exactly the same in europe. every time we go through this process. >> let's take an attendance call. volumes are still considerably low. today is a holiday. last week we had a significant holiday in the u.s. attendance is just low. there's not the kind of participation. so if you get something like that that spooks a few participants who actually are in the market, it's going to have a more profound effect and you'll see a percent and a half pullback. >> where do you stand on the notion that there's going to be a chase for performance in the fourth quarter and therefore will want to be in this market, putting sort of a floor

underneath? >> that's a legitimate concern for people who aren't fully invested, but up to where they should be in terms of risk on with their portfolios. i do see there's considerable amount of risk to have that continue to push against them and work against them. we have moved quite a bit in the last month and a half. it kind of gets a little bit dicey towards year end. it may actually be the time where we see a pullback. people take their money off the table ahead of the big trend, and then by december, we have maybe 1410 in the s&p 500. >> when you look at apple, down also on monday off of those only five million phones sold. only 19 per second were sold over the weekend and that was a disappointment. but we had weakness in the stock. do you see that as evidence that people are actually taking money off of the winners that have been for the year and sort of sitting on the sidelines as we enter the fourth quarter? >> a lot of people have considerable almost triple digit

gains. you look around at the holders. you look around at what percentage of portfolios hold apple. i would say that people should be a little bit wiser. i've been talking about taking a little bit of that risk off and putting on some type of protection. vick's is very low. it is cheap to protect your portfolio. you want to do it before everyone else does. be a trend setter rather thn a trend follower. >> some much-needed good news for research. goldman sachs raising revenue efforts citing an unexpected jump in the subscriber base. they are moving lower in premarket after a slight decline in yesterday's trading. but the agony goes on as far as apple is concerned. research in motion, that's an interesting chart. >> interesting in that it's so bad, interesting? >> it depends -- it's very similar to looking at spanish bond yields. it depends whether you go wow, look at that move, or you take the longer run view, which is clearly in one direction.

>> the optimist when it comes to research in motion. what he said yesterday, the ceo of research and motion, was that there will be testing a blackberry in the next month and that is a good sign after so many delays and so much uncertainty about whether or not this thing was actually going to hit the market. doesn't mean it's going to hit the market in two months. we just don't know at this point. >> didn't he come to cnbc about a year ago -- >> you were there. >> saying look at this. >> or we kind of knew it would be around. >> the first quarter 2013 is what they're saying. 80 million subs rising at a faster rate than the previous quarter is good news. interesting, though, apple as you mentioned down two days in a row. down two and a half percent yesterday. the column is called "tv will be apple's undoing." he wraps the map snafu

demonstrates circumstances are turning against apple's current business model. if you are going to take on the likes of google with these large scale ecosystems on your own when you don't have first strike advantage, it's not like tackling the music industry with itunes. it's not going to be like that at all. >> unless you believe that apple tv is a phenomenally new product that changes the landscape and that's the debate we've had for several months, is it going to be essentially an add-on to existing apple tv, which is neither here nor there, or something that combines voice activation. i saw some discussion that maybe the new ipod might be the controller, might be the new remote control for the apple tv. that type of thing could revolutionize the new product. arguably. >> we'll see. we certainly know they have a war chest to finance pretty much whatever they want to do. >> they are a very efficient, very thought-through company.

you've got to give them that, surely, that they wouldn't embark upon a new product cycle unless they were sure. >> google is going to play this in a very interesting way. they're going to let them hang themselves at least for a little while on maps. >> take a look at how google has been doing the past couple weeks. google has been a steady march higher and the valuations are still attractive. there is a reevaluation going on at quarter end here as to whether you want to be. do you book the gains that we've seen in apple or continue with google? it's an interesting debate. >> if cramer were here, he'd say short-term a buyer of google. >> if you sold, that was a mistake every single time. it's the biggest ipo listing in the u.s. since facebook. we're talking about the mexican unit. we'll talk to the ceo after the stock opens for trading. also julia has a fascinating interview with dick costolo, talking ad strategy, the ipo

landscape and more. i don't know if you heard this yesterday. some sounds from a blackberry jams event. this is a mock video parodying reo speed wagon. we're back in a minute. [ female announcer ] need help keeping your digestive balance? try the #1 gastroenterologist recommended probiotic. align. align naturally helps maintain digestive balance.

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will this lead to artificial earnings results as we go into the reporting period? we're joined now by francesco guerrero, joins me here. always good to see you. >> good to see you. >> we've seen major buybacks. the nike one stands out as a huge one. are companies purposefully trying to inflate earnings per share as we go into what we know will be maybe the first negative quarter in three years? >> it's really a big dilemma for corporate executives all around the country at the moment. they have the cash, they just don't know what to do with it. so one option we've seen is they buy back their shares. there's a number of reasons for doing it. they haven't been a high. there's also a more cynical reason to do it, if you boost your earnings per share, the compensation goes up. so that's another reason why they may want to do it. when you talk to executives all around the country as i do, they say well what are we supposed to do? we can't buy companies. the economy is uncertain and we

have a fiduciary duty to do something with the cash. >> at the same time, there is a choice there and that is you can return it to shareholders through a dividend or a special one-time dividend or a buyback. from a company's standpoint, is one better than the other? >> from the company's standpoint, it shouldn't be. but there's an issue with -- the thing i mentioned about compensation. it must play a part, even if it's not overt. it's an incentive that is there. the shareholders receive that and therefore should be done that way. the advantage of the buyback is you can toggle it on and off. the dividend is much more difficult to cut once you raise it. >> but this is a surrendering of ideas. if the ceo says actually, i don't know what to do with this pile of cash, i'm going to give it back to shareholders, you've got to question why the ceo is there. you're taking it to new horizons. there are very few businesses that are totally closed or that

have 100% market share. >> it speaks to the very difficult circumstance that we're in. it's a really uncertain moment in that history. so they don't know what to do with it. you have to commit for a very long time. i think the idea is that they have to be conservative. >> it's secular. there's a lack of confidence because ceos won't move the companies forward. >> the question is what do they do with it? >> before we lose you, we were talking about spain earlier on today, it was interesting whilst we saw those violent scenes in spain yesterday evening, the prime minister of spain was in new york on a three-day visit and he was talking to you guys at the journal that's written up in today's paper. how would you gauge his move? when will he go for his bailout? >> i think he was very difficult to say he cannot do anything about that. he did strike a confident tone

about how spain is beginning to survive this. he also said spain has had the very long history. he was very confident that as for when they need to and not a minute before that. i think that's what they're going say until the budget and beyond. i think they are going to assure the markets and hope that the yields stay low. >> francesco, good to talk to you. >> as we count down to the opening bell, it has been a rough year for radio shack and best buy. should you put them among the retailers on the endangered species list? take a look at futures as we thoed this morning's open.

this is where we stand on futures at the moment. looks like we could have a relatively firm recycling negative open, certainly not as bad as you might think given the sort of news and the price action coming out of europe. art cashen joins us, director of floor operations with ubs services. what should investors do at the open? >> it looks a bit mixed. i think people are uncertain. we've moved from the foe kcus o the streets of madrid yesterday to the streets of athens this morning. i think you can't pass up spain. i'm afraid that they are teetering near a constitutional crisis. there are riots going on in catalonia. they want to secede in the spanish union. there's a lot going on. and if the leaders keep dillydallying, the streets could take over and that will not be a good thing. >> i thought it was interesting because you were really pushing back in terms of how many times

we've had catalonia wants independence. i thought simon made an interesting point that catalonia has repeatedly asked for independence. what are you seeing that's different this time? >> well, i think you're beginning to see the evidence of a lack of unity over there. you have to remember that the germans are operating as reluctant saviors here. they're looking for almost any excuse not to get dragged in to this. they've been concentrating on greece, but if they begin to believe that you can't get some consistent and cohesive movement in spain, they might back away there, too. >> earlier this week, you said it feels like there's no geopolitical risk. are you changing your tune on that? >> well, i think it's about time. it's always good to be ahead of the game. i think we have to price in some more. the situation between china and japan, they continue to be nose

to nose at sea. on mainland china, they're beginning to destroy some japanese businesses and so forth. so that's a deteriorating situation also. >> auto makers, too. >> absolutely. >> we'll see you later. when we come back, it's the biggest u.s. ipo since facebook. and then could twit bter be the next to go public? plus, the dirty little secret of most start-ups. all that when we come back. [ male announcer ] what if you had thermal night-vision goggles,

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they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. just heard the opening bell, as we kick off this wednesday session after the worst day for the s&p 500 in about three months, as you probably know by now, the dow lost 101 points yesterday. still avoided, though, that 1% loss, which we have not seen in some 60-odd trading days. the big board this morning, mexico celebrating its new ipo.

this will be the second largest ipo in the u.s. of the year. the president of mexico in new york for the u.n. general assembly. >> we have not mentioned facebook. >> we have not. the ceo is immediately stepping down. how many times do you hear about a ceo immediately stepping down? not even sticking around for a transition period until they find the new guy. the cfo is serving as ceo on an interim basis. the backdrop to this story is that radio shack has posted two straight quarterly losses. the stock was down 73% year to date, and that stock on this news is up by more than 1%. interesting here. maybe finally something will happen. >> they're not ruling out an internal candidate, which didn't really ring for change, does it, necessarily? >> not necessarily. depends. >> a little bit like john chambers saying we're looking at possibly having a new ceo at

cisco. >> given the staples organization yesterday, radio shack is likely to come out with something like that in the next few months or quarters. meanwhile, a new cfo at yahoo!. if you missed the headlines, she expects the company to have a strong mobile position by 2015. we're hearing a lot about 2015 lately. they will approve only projects that can draw 100 million users or 100 million in revenue. but a little detail on individual projects, per se. >> so that stock continues higher today. take a look at gold miners in general. gold price itself is down by about $15 a share. the miners are falling based on the precious metal falling as well. this is a story that you don't talk too much about, but there have been a rash of strikes in south africa. started with a mining strike where 46 people died in that strike.

finally resulted in an 11% to 22% pay increase. so a lot of the miners in that part of the world are thinking wow, we strike two to push for these pay increases and that's exactly what what's happening with anglo gold. two more mines are down and that stock is down by 2.9%. so it's to watch here. >> barnes & noble announcing two new versions of the nook today. a $199 version. another one for $270, available for preorder starting today as the company takes on as the tabloid wars heat up. the ceo was on one of the network shows this morning and said unlike music, people are always going to love holding books. so the tablet is not going to become like an ipad. >> for sure? >> that's what he said. >> that's what the ceo said. the man who's making the tablet, who has a bookstore is saying. you know, there's definitely a

point of view. >> interesting interview with the ceo of netflix saying they're going to focus on europe. they eventually see themselves being on every continent except maybe china. and really taking on amazon, calling amazon prime a confusing mess. >> that's quite scary, isn't it, if they're going to start moving into another zone? isn't that the sort of thing that can equally spook investors and flatten the top line? >> could be. we're watching alpha natural. this is a story that broke after the bell. alpha natural is being booted. it's now a mid cap stock. it's still one of the world's biggest coal producers for steel making. it's down 90% year to date. actually, in the past 18 months here. just last year, got nasty for $7 billion. so my how fortunes have changed. and what is going into the s&p 500, kraft food groups, part of

the two companies that kraft has become, mondelez. >> which is russian for a vulgar -- >> a vulgar sexual term. we've checked that out. it's slang. it's making the rounds. there's actually some branding experts that say that in russia, they might want to reconsider using that name in russia. because it's too vulgar. >> unbelievable these things don't get vetted. kohl's is going to add 1,500 jobs, 12 new stores. percentage-wise, not that big. they already have 1,100 stores, but that bodes well for some seasonal hiring. >> i thought that was really interesting, the timing of that announcement just as we learned that michael kohl's is checking out in terms of the stock sale.

>> i'm sure michael kors -- >> to see what not to do. apple continues lower. and google shares are higher. so interesting thing to watch here. so let's check in with maryanne thompson. >> right now, the offering price is 1218, the indication is 1245 to 1251. we're still waiting for that to open.

questioning how much qe-3 might help the economy. we have a number of them trading, posting their worst day in two months, including france, portugal, spain. germany having its worst day in one month. overnight because of those concerns about qe-3, in part, we saw china drop to a three and a half year low. european banks weaker in the pre-market in. the pre-market, u.s. banks were holding up a little bit better, although banking index right now is fractionally lower. what we are checking out is the vix. this is the measure of fear which topped 9% yesterday. as you look out on the curve, the index or the futures are much higher in february because of concerns about the fiscal cliff, but we will be teaching a watch on that because we did see a significant pop in yesterday's session. given the concerns about europe and the u.s. economy, we're

watching materials as well today. typically these react most when we have these increase concerns about the problems in the eurozone, the ongoing problems and the lack of progress in actually dealing with those problems. higher expenses at apply there. that stock is likely to be a big mover today. we want to note american greeting signal a.m. receiving an offer to go private from the weis family. again, still no open for the ipo. >> let's shift to the bonds and

the dollar. good morning, rick. >> good morning, carl. like an answering machine, there's a loop and the markets have a loop and we're seeing this loop again and we all know what it is. let's look at some one-month charts. it's starting to come down. you can see aggressively the boon chart, over the sea, over the pond. their rates on the ten-year maturity are looking very similar. also moving down. well, what's moving up? let's look at a one-month chart of two-year maturities in spain. you can see what's kicking up. about 25 basis points. you can see what's kicking up on the ten-year. very similar move. but as important as that is, it's a parallel shift on their curve, meaning the short end and the long end rates have moved up together. many believe the trigger is the next chart. we are bumping along a very significant area. if we start to move much below the steepness of 250 basis

points that separate those two maturi maturities, it might be something to pay attention to. as for what's going on in europe, tomato, tomato what's in a word? i think they need to put the true word in place, which is probably that word. back to you, melissa lee. let's get an update on emergency and metals. phillip is live for us from chicago. great to speak with you. let's start off with the picture in oil here. we dip below 90 for the first time since early august. which way are traders betting? i heard that as we enter quarter end, a lot of traders were actually alongwell for a long time. >> it's going to be a very tough trade for them. we've been down about 10% in the last six sessions. we're sitting right around 90 dollars. got resistance up at about 96. concerns over global growth. got saudi arabia, they're going

to ramp up their production all the way until year end to try and keep those oil prices down. but the real picture is the department of energy. their inventory, if you look at at the tall stocks for the five-year seasonal average, is sitting right around 370 million barrels. that's their inventory. the five-year seasonal average is down about 325, so we're 10% over. remember last week we had a build of 8.5 million barrels. this week we're expecting a build of two million. if you see in about an hour when oil prices and the d.o.e. releases their stocks, you'll probably see oil take that next leg lower. >> let's switch gears and talk about gold as well as silver, for that matter. silver has been handily outpacing gold this year, so i'm wondering if traders are seeing the silver trade having more upside. granted, it's a less liquid market. but maybe going into the final quarter of the year, that's the bet that's in place. >> the silver trade has rallied about 20% in the last two

months. it is technically an industrial metal. it has gotten a boost because of the qe hype. traders are thinking that that's the cheap metal to get into, but with prices up at 33.5, i think that they're a little bit lofty. i think we could see a connection back down to 3050. watch the dollar index. the dollar has been gaining steam against the euro. these products that are based in dollars, they're all going to set back. >> but to be clear, the degree to which you could have some of the rally fade in the precious metals is not as bad as it might fade elsewhere on the belief that qe-3 won't work. you still think that broadly you will hang on to the gains that you have. >> i think that you're definitely going to pair back some of the gains. gold up about 10%. you could see a 5% correction. we've already seen a steep decline. we're signature right around the 1737. gold will probably try and hold

on to 1,700 and keep that, but if we get any break below that we're probably going to see another correction lower. >> all right. phillip, great to speak with you. thanks for your time. >> thank you. there's a market index that's beating the s&p this quarter that you may not be aware of. also ahead, the ceo of the mexican unit of the company's debut, we're still waiting for that first trade. as you can see, gathering around the other post here. as we head into the break, this morning's early movers. customer erin swenson bought from us online today. so, i'm happy. sales go up... i'm happy. it went out today... i'm happy.

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the fourth latin american company to list on the nyc this year. we may go to mary thompson, if you are there. >> i am. this is -- the offering price was $12.18. it opened $12.60, and actually that's where it's trading right now. opened at 12.60 but it's popped up. back to you. >> thank you very much, mary thompson. u.s. markets losing some steam

after rallying. the transports have not been onboard. are the latest moves a sign the rally is actually stalling? let's take a look at the charts with katie stockton. we'll start waoff with the s&p 500. how are we looking? >> the framework is quite bullish. we saw it exceed resistance around 1420 based on the april high. that breakout targets 1530 with an intermediate term perspective. so to me, if we do pull back deeper in here, it's just a short-term move. something that we should view as a buying opportunity. >> how concerned are you that the transports have not confirmed the move higher on the dow/s&p? >> i'm not concerned at all really. underperformance has definitely pronounced, but they've really underperformed since late 2011, and the market has managed to go higher despite that. we've seen the s&p 500 rally about 14% or 15% over that same period that they have underperformed and we saw them outperform strongly in 2008,

which was a very weak market. so they had somewhat defensive tendencies back then. so i really don't think it's essential to see leadership from the transportation sector. i'd really prefer to see frit the technology sector, which we have seen. >> walk us through what is leading -- and also, in terms of small caps, things with a little higher volatility that people tend to look to as canaries. >> right. so small caps -- and i'd also highlight emerging markets as having captured some performance recently. if you look at the emerging market shares, they've really lost momentum. i think investors will ultimately be seek out performance there because they're less overbought than the u.s. market. >> i heard you suggest that it was a buying opportunity. i didn't quite catch the level that you were targeting on the s&p. how high do you think we can bounce? >> well, 1420 is initial support and the breakout that we saw recently targeted about 1530, although the next resistance

that it faces is up at the 2007 high. >> 1530 is 100 points higher than we are now. >> it is. and i think that's a reality in the fourth quarter. i do. >> 100 points on the s&p? >> yep. >> and katie, i mean, 1565 i think is the record high on the s&p. how rigid is that resistance, if, in fact, we get close? >> that's definitely very strong resistance and i would widen that out to 1550 to 1575. it's a formidable level. that said, i do think we exceed it in the first half of next year. >> did i hear you seau think we'll have a new record high on the s&p next year? >> i think so. the momentum certainly supports a breakout. >> wow. >> interesting. >> katie, good to talk to you. meanwhile, "the wall street journal" reporting this morning that more and more people spending more on their cell phone bills, even as they dial back on the family budget. like food, clothes.

>> eating is so overrated. >> the children don't need to eat. let's buy a phone. >> fill in the blanks. my smart phone is more valuable than blank because blank. tweet us @cnbcsquawkst. interesting, some of the cell phone carriers are actually trying to test the limits of how far households are willing to go. some are speculating maybe they're pushing it too far. but it's become a big chunk of household spending. meantime, a big day for the largest u.s. ipo since facebook. we'll talk live with the ceo of the mexican unit about his firm's wall street debut as they open just moments ago. and then when will we see an ipo from twitter? stay tuned for a rare interview with the ceo when "squawk on the street" comes back. ♪

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first on cnbc is marcos martinez, ceo of santander, spain's largest bank, a bank we talk about all the time.

a lot of people highlighting how investors are being drawn to emerging markets where growth is happening. because it's not happening in europe. relatively stagnant in the u.s. but mexico is look at 3%, 3.5% in 2013. >> yes. it's very exciting because it's the right time for this ipo because the country is very well perceived by investors. our bank very well received by the international community. very successful. >> better this than the alternative, absolutely. how do you convince investors -- you have a new president elect that takes office in november. there are still worries about the social climate. how do you get investors past those worries? >> transition has been very good one. and it's going to happen -- some

of the reform has to load better. seems to me the probability is much better than in the past. everybody is very optimistic about the country because of that. >> when investing in mexico, a lot of people think it's very dependent on how the u.s. is doing since mexico and the u.s. have such a tight economic relationship. so in terms of the business, what is the core of the business there and are you independent of what happens in the united states as a bank? >> yes, we are focused on the market. even though we have a bank operation, and asset management business, too. and insurance, too. retail banking is the most important at the moment. >> your parent company, santander, still owns 75% of you. it's a bank that needs money, that's why you're going through the ipo.

how do i know as an investor that santander won't flood the market with further stock going down the line? >> well, santander has a strategy, a list of different banks in the local markets. to have more community with the markets. and even though we have that company, santander is doing great in retail banking. decisions that are better for the mexican market. >> can you prevent them from selling the other 75% of your bank on the market? >> yeah, they have decided to sell a part because mexico is a very good investment for the group and is one of the main sources of profit and is good for the group. >> before we let you go, mexico's been through many, many

debt crises. what is their view of how europe is handling their debt crisis? are they doing it the wrong way? >> well, the right way -- in fact, they have a lot of time. actually, things look better. you see that something good is going to happen in the future, fortunately. >> we can hope. marcos martinez. thank you very much. let's take a quick vote. we have breaking news at the top of the hour. new home sales. and a rare interview with the ceo of twitter. "squawk on the street" will be right back. on gasoline. i am probably going to the gas station about once a month. last time i was at a gas station was about...i would say... two months ago. i very rarely put gas in my chevy volt. i go to the gas station such a small amount that i forget how to put gas in my car. [ male announcer ] and it's not just these owners giving the volt high praise.

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let's invest in our teachers... ...so they can inspire our students. let's solve this. welcome back to "squawk on the street." august new home sales are out, a seasonally adjusted pace of 373,000. only a subtle revision of a few thousand higher to last month's 372 and it's a little light as to what we're expecting. we're still hovering at some of the best rates on new home sales going back to the summer of 2010. but to give you a little perspective, one of the key benchmarks for this series occurred in september and

october of 2006 when you were over one million units, just to give you some historical perspective. back to you. >> all right, rick. thank you very much. let's get the road map for the next hour on "squawk on the street." investors grow increasingly anxious about spain's instability. as global fears come back to the forefront is the big rally finally over? >> plus, within the social media revolution, one name is still top, twitter. we'll have the latest from dick costolo on his company's mobile success in just a moment. >> barnes & noble unveiling two lighter and thinner high definition tablets, but is it enough to finally win a bigger share of the ever growing tablet market? >> last but not least, the age old debate, will the web kill brick-and-mortar retail stores?

>> back to the markets. stocks closing in successive lows. warren meyer is here. the market is saying impress me today. >> absolutely. look at the run-up that we've had over the last month or so. forced that up maybe a little bit farther than it should have otherwise. yesterday we get some negative talk about what the fed action is really going the mean. you see the pictures of all the protests over in spain and that puts a little worry in this market and that's why we've had to sell off. we had the housing numbers this morning, which missed expectations a little bit. i think that's going to feed on that negativity. >> what about all those underperforming managers? >> i think the few of them might have gotten in last week and now may be kicking themselves a little bit. it's tough. there's a lot of money on the sidelines. i think longer term, this is a place to put your money.

i think we're in for a short-term -- some turbulence over the next month or so. >> i would have thought this is actually quite bullish. you just listed a lot of stuff that's been thrown at the market. i think for wall street to ignore basically what's happened in asia and europe overnight, those are big falls on some of the big banks in europe today and it's brushed off. i think that's quite bullish. >> the equity market is supported by the fed right now. we know there's a floor underneath there. so even though you would expect maybe a much stronger selloff, once you get to that point, everyone realizes listen, the fed is there to help. why am i selling in to that? let's take a breather. it's dampening those downward move moves. you're flot not going to get those down days. >> what's the tell on the markets these days? when you look at these boards, where do you go first in terms of predicting where the markets will end up at the end of the

day? i'm watching the board over here on your shoulder and crews dip below 90 once again. >> i watched the euro. that relationship is still holding true. if the euro is down, the equity markets tend to be under a little pressure. i look at all the asset classes across the board, if it's risk on, risk off across the spectrums. >> so we're back to correlation, in other words. >> unfortunately, we are. we had a little breakaway from that a month or so ago. >> we just had a technician tell us that the framework is positive to 1530 and then saying a blowout past the s&p's record high next year, not unthinkable. >> it's not unthinkable. again, we've got to get through short-term turbulence here first. >> what is that, the election? >> you've had a strong run-up.

earnings expectations, we're seeing them go lower and lower. >> you've got a fed that is inflating, that may have abandoned its inflation mandate temporarily in order to do what it can on the growth side. that's the bigger issue. so they're going to inflate assets. >> but again, that doesn't necessarily mean we go up every day. we may go up and the absence of any other movement, but it's also going to dampen those selloffs that we're seeing currently. i think it goes both ways. >> is it as strong as it has been in prior versions of qe? there's a big debate about that. >> is it existent at this point? >> some people say it's bigger than ever. if you heard some of the comments coming out yesterday, my personal concern is i think they're trying to inflate an asset class, in particular the u.s. equities, that don't have the broad base that they used to. so the effect across this country is not as great as it used to be. >> the wealth effect. >> i think their goal is to get people back and working. i don't know if that necessarily

spreads it across the spectrum that they're looking for. terror the degree they can affect housing, that's a bigger bang for your buck. >> it certainly is. i would agree with that. >> would you say the most encouraging thing for the broad economy right now is what prices have done, what sales have done, or what the equity market is doing? >> to be honest with you, i look at the health of the u.s. corporations, and they're very healthy. granted, they've trimmed the fat as much as they possibly can. we need consumers to start buying and participating in this market to really elevate them again. but as they stand right now, the corporations are very strong financial shape right now. so i think long-term that bodes very well for this marketplace. >> literally bloated with cash. like an athlete who's trained for months and has no event coming up. >> you work hard and then you rest up, and we're just waiting for that time to kick in. >> we'll see what the day

brings. >> all day long here on cnbc, we're talking the social revolution and specifically taking a look at the most powerful private social giant out there that is twitter. julie sat down with dick costolo. i understand a key topic you asked about was twitter's advantage over its peers and being a mobile first company. >> that's right, melissa. when i asked how twitter's ads compared to facebook's ads, ceo dick costolo said that twitter was the first ad platform designed from the ground up to work everywhere, mobile tablets and of course the web. i asked him whether the company's two ad products promoted tweets and trends are enough to grow the business. >> the short answer is yes. we think that the ad platform as it is today with some capabilities that will allow self-serve advertisers to use the platform more easily is the scaleable model that will do everything we need to do for business. >> is there an inherent conflict between serving your users and serving your advertising partners? >> no. and the reason for that is we

don't charge advertisers for displaying the ads. the advertiser only gets charged if the user interacts with the ad. click on the link in the ad, they retweet the tweet, they reply to it, they favorite it. so our business is only going to work if we're putting content in front of our users that they want to see and that they engage with. and that's the simple equation. if we do that, the users will be happy. our business will work and our advertisers win. >> how fast is twitter revenue growing? >> our revenue is scaling the way we want to scale it. i've been very clear, i think, in the past about being practical but cautious about the way we roll out our ad platform. i did that because we wanted to make sure we were rolling out our platform in a way that preserved the user experience

and made sure we weren't doing things that our user rejected or didn't like. >> you only introduced mobile ads this spring. how are they doing? >> our mobile ads are doing quite well. as you mentioned, we just introduced them this spring. i have said previously and will repeat here, we've already had days, even after only introducing them a few months ago where mobile revenue has exceeded nonmobile revenue. we're very excited about the future of our mobile ad platform. i think the beauty of our ad platform is this. it was designed to go everywhere the tweets go and the tweets are mobile from day one. so we live in a world where we've designed this platform to work for mobile from day one. as opposed to having to port something else to mobile. >> he says engagement rates are between 1% and 3%.

that's equivalent to a rate of .05% for traditional online ads. we'll have more from my interview in the next hour on "squawk on the street" and you can find much more on my blog. simon? >> that is fascinating. to hear him talk about mobile as being the genesis of the platform, what a difference from facebook, and look at all the trouble it's caused those guys, right? >> absolutely. we have to remember that twitter started with the sms format, the texting format, so it's designed to be used on any mobile device, not just these fancy iphones that we all carry around with us all the time. so really, any mobile device and that means any web platform as well. that's really what distinguishes twitter's platform. >> i know you're exciting what you heard there. >> i thought it was fascinating that advertisers only pay for advertising if somebody actually clicks on it. you've got to wond wlaer ter wh

likes of facebook or google is thinking. costolo is putting his money where his mouth is. if it doesn't work, you don't pay for it. >> there are other ad models where you only play for certain rates. there are other advertising systems that do also only charge when ads work, but what's interesting here is that costolo only charges when ads work for users and for the brand. so for this really to work well, it's kind of a virtuous cycle. if people engage with an ad, then twitter is going to show that ad more. it becomes content rather than an advertisement. that's really what is supposed to work here. >> julia, let's talk to you a little bit later. good stuff. in the meantime, let's take in some news from the biotech space. >> some good news out of biogen, up 2% after the company announced its experimental hemophilia bee treatment. this is a late stage study. the company is planning u.s.

regulatory application for the first-of next year, so potentially good for patients and investors. >> thank you very much. when we come back, the dash for cash intensifying in the race for the white house. who are the top donors and why do they think it's money well spent? also, do top executives really see the business climate heating up or cooling off with the fiscal cliff? john engler is the man in the know "squawk on the street" will be right back. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again.

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it's been said that politics is a rich man's game, but with each party expected to spend as much as $750 million on this year's presidential campaign, the saying has never rung more true. all day today robert frank is looking at the top donors for each major political party, and this hour, he's focusing on the dems. take it away. >> we hear a lot in the media about the gop donors, but we don't hear much about the rich contributors to barack obama. so let's focus on the left side of the aisle this morning. we're using fresh data here from the center for responsive politics, focusing on donors who gave to groups that contribute some or all of their money to the presidential race.

we're going to start with number five, jeffrey katzenburg, the ceo of dreamworks. he and his company have been lobbyists for a lot of copyright companies in washington as well as protection against china. katzenberg attended a lunch with biden and top chinese officials. after that, dreamworks has a jv with the son of china's president. going on to our number four on the list is jim simons. he is the founder of renaissance technologies. and he is the richest of the democratic dee nonors with a ne worth of $11 billion. education is a big issue for the democrats. math education and reform of public education, big issue for jim simons, who i'm sure will be a big voice for democrats. remember, president obama's change of position on gay marriage this summer, shortly after that, he got a big check

from a guy named jon stryker, architect in chicago, big supporter of gay rights, spending more than $240 million over the years. going to our number two, very little known about this man. irwin jacobs, the co-founder of qualcomm. he's retired from qualcomm, but qualcomm remains a big lobbyer in washington on lots of issues, telecome regulation, taxes, copyright law. when you look at the industries that support obama, you've got finance, health care, you've got media. all of which have done pretty well over the past four years. we're going to have the top number one today. this person over here, the mystery man, on "closing bell." we'll have also romney's biggest donors ahead on "power lunch," so stay tuned. >> that is a cruel tease, robert. i cannot believe you're going to make us wait for "closing bell"

until number one. >> what's great is you're going to be surprised who that is. you'll also have a lot of surprises on the republican list. when i did this reporting, i thought i knew who those donors were, but i didn't. so got to stay tuned for later. >> another great tease. robert, good to see you. billionaire boss. the surprising results of new research into the success and failure rates for venture backed start-ups. stick around to see them. also retailers trying to avoid going the way of dinosaur. which stores are most likely to end up on our "squawk on the street" engaged species list. that's straight ahead. [ male announcer ] you are a business pro. monarch of marketing analysis. with the ability to improve roi through seo all by cob.

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clearly a lot of attention over the last 24 hours on the violence. first in spain, and then in greece. will this lead to more euro weakness? as, of course, the sovereign debt crisis appears to grow in intensity, joining me is

kathy lee. what do you think? >> i think this will be more pain for spain and more pain for the euro. i think the key here is that the economic crisis is starting to quickly become a political and social one. as long as the prime minister persistently refuses to ask for a bailout, there's a very growing risk we could see moody's cut spain's rating, which would be a slippery slope for euro. >> does it really matter what moody's does in this environment, where actually we're discussing whether there will be intervention on the ecb? >> first of all, i think it is very relevant because this would bring spain's rating down to junk levels, which is the lowest of all three rating agencies, so it's a pretty big deal. and then the ecb program can't be implemented until spain actually says they want help. so it depends what happens first. i think it's going to be a slippery slope. finally, we've got the budget coming up tomorrow. there are more painful cuts, it could mean more pain for spain

and more pain for the euro. >> there's a lot of tifs in tha. >> you could also argue that all the central banks have been ineffective in generating momentum in the markets right now. so even if they're persistently buying, it's really about risk appetite and sentiment. i don't think there's enough there. central banks could come in and make another announcement, but i think having just made these unprecedented announcements, that that could lead to firefighting. >> what are you targeting? >> looking to actually sell on the break of 1.2825. with the stock at 1.2975 at a target of 126 in the eurodollar. >> for more currency trades, be sure to catch "money in motion"

on friday with melissa at 5:30. if you want more education about currencies, go to currency class. back to you guys. from currencies to smart phones, "the wall street journal" saying this morning that more and more people are spending more on their cell phone bills even as they dial back on the family budget. brings us to this morning's squawk on the tweet question. to me, my smart phone is more valuable than blank because blank. tweet us at cnbc, we'll get some of your responses. when we come back, we're minute ace way from breaking news on oil inventories. a rally or a pullback? auto make verse a big reason to smile. we'll find out which age group is revving up their purchases of cars, when "squawk on the street" continues. ♪

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7:27 on the east coast. new home sales for august coming in below expectations. american greetings up 15%. the greeting card company receiving a $17.18 a share takeover bid. shares of hewlitt packard falling to new eight-year lows. the dow component now down more than 36% so far this year. new car sales among 18 to

34-year-olds are finally back on the rise. phillip is in chicago with why that is happening. >> part of this is because the skmi starting to improve, but this is something the auto makers have been waiting for. you'll look at this and say that's not a huge improvement, but keep in mind it's been down for five years straight. this is the first improvement we've seen since 2007. even more important, when you go up to 34-year-olds, it's up 1.12%. first of all, 18 to 34-year-olds are buying more new car due to easier credit. and they're also taking advantage of the ability to stretch out those auto loans sometimes to six, seven years and that means a lower monthly payment. but ultimately for the auto makers, this is the key. they need to win over these younger buyers. >> they understand this is the future of their industry. it's the future customer and it's easier to retain a buyer than it is to conquest a new

buyer in a brand. the manufacturers know that and they're targeting them aggressively. >> it's all about walking up the brand. but for the big three, they've really struggled. look at the last five years. this is where the 18 to 34-year-olds are going. clearly they are going to hyundai and kia, up 6% for the korean brands and also going to the european brands. vw is having some nice moves in that area. as you take a look at shares of hyundai, as that stock has gone up, so have sales here in the u.s. and really around the world. so that's the story of the 18 to 34-year-olds. it's an important category to watch in terms of growth in the auto industry. >> can i ask you about the japanese auto makers cutting production in china? is this a way of cloaking a slowdown in china, or is this truly because of what is going on between china and japan, and is therefore -- does that make it an opportunity for the likes of a gm? >> it's a little bit of both in terms of why they are doing this pullback in production. clearly there's some tension

there. that's at the heart of this. but also there's a slowdown in japan. for the japanese auto makers, if they can pull down production, that's what they're going to do. is this an opportunity for gm or for ford, a much smaller player than general motors over there? perhaps a small one. keep in mind the slowdown across the board over there for most part has hit all the auto makers. the one exception, general motors. they have actually been growing sales over there. that's an underreported story. a lot of people look at china and say everybody's slowing down. not gm. they've been able to grow their sales. >> interesting. phil, thank you. some breaking news on oil inventory. let's go to sharon. >> we're seeing a bit of a change here in the oil price. that was because we are seeing a change in the direction of the oil supply data from what traders were anticipating. crude supplies fell in the last week. they did not rise. they fell by $22.4 million barrels. supply is down by half a million

barrels. we have fuel supplies that were down by half a million barrels. analysts had been anticipating an increase, so this is a bit of a surprise. we're seeing oil prices back above $90 a barrel after falling below that mark earlier for the first time since the beginning of august. i'm joined now by raymond carbone, a veteran trader here on the floor. we're often talking to you about these envenntory numbers. today it may have a lot more to do with what's happening in europe. >> yes, i think once we see protests on the street, we're realizing that they've been k k kicking the can down the road. it is not solved. it never has been solved. we've seen a rally in the dollar and we've seen the precious metals give back a little bit of their gains, and of course oil following the dollar euro trade a little bit. >> do you think that this somewhat of a surprise here for the inventory data is going to be enough to keep oil above $90

a barrel right now? >> i don't think the inventory data is the key to where the oil price goes. i think the expectations set up what the reactions to the numbers are rightly or wrongism i think it's a bigger picture. that's macro picture. of course we can't forget about the geopolitical picture. all of these can be erased with the heating up of rhetoric. >> we got a report out talking about iraq's supplies, much greater than people anticipated. we're seeing more supply not just here in the u.s. what impact is that having on the price? >> obviously it's driven us down from those highs that we saw, which were pushed up by geopolitical tensions. we know that saudi arabia can produce and said they would produce in case of an emergency. so the market looks lake a well-supplied market at the moment, but that's because no when's focus on supply fears right now. they're focusing on the demand fears. that can change on a dime. >> looking at the price right now, just above $90 a barrel, where are you seeing prices for today? >> i think we continue to go up,

people are going to look at that and continue to watch those demand numbers. and of course geopolitical -- we're going to move around. this is a volatile market and we've seen it. >> there you have it from ray carbone. i'll second it back to you. >> thank you very much, sharon. meanwhile, the debate in retail has for many years now been will the web kill brick-and-mortar? staples announced yesterday that as part of its restructuring plan number three, they're going to close 30 stores and scale back many of their existing operations. toys 'r' us chairman was on "squawk box" yesterday defending brick-and-mortar. >> the internet is transformational, but it's not the exclusive playground. in fact, it's the stores that are going to win in the end because of that physicality. >> borders, circuit city and many others have not been so lucky, so the question we're asking is who is next.

stacy, who's next for the chock, do you think? >> i think some of the most vulnerable spaces are consumer electronics, number one. best buy has announced it's closing 50 stores. that's simply not enough. you've got hh greg out there opening stores still. and you have radio shack. today they announced the ceo is gone. radio shack needs to close stores also. so you're looking at that business model. retailers need to embrace that and right size their stores. >> rocco, what does it mean for investors? the left column of "the financial times" is quite entertaining today talking about this dreary repetition of so many businesses of basedly saice same restructuring. increasingly focused on online whilst expanding in china. how does an investor sort through what they're hearing?

>> you said it. that's the problem. staples are going to sell more stuff online and everyone's going to mobile, and it's great because that's where the customers are right now and that's where amazon has essentially set the trend. but this is a case of retail e reacting. five years from now, what will they be chasing next? the next big thing. you have companies like starbucks and amazon that are ahead of the curve. starbucks has been working on the different mobile initiatives that they've put out for a long time. >> isn't starbucks completely different? you've got to go in and buy your coffee. they have an inherent advantage in this kind of world. yes, they are embracing mobile and they're ahead of the curve, but you've got to have physical locations. the model supports that. >> i don't think that they're different in terms of they think like a tech company. now, of course, there are going

to be addition tindistinctions, end of the day, it's about thinking like a tech company and innovating and saying okay, yeah, mobile is big now and we need to be a part of that, but what's next? let's not let amazon dictate what's next. we need to dictate what's next. we need to change the way we do business. we need to become something that's unrecognizable to our customers. in the long run, innovation is what wins. it's thinking like a tech company and not thinking like a retail company because that type of thought process has failed for the last ten years. >> to melissa's point, the coffee that you order online and have delivered to your house two days later is not as delicious. >> you're thinking of it literally, though. you're not thinking of it out of box and thinking of it from a bigger picture standpoint and thinking more theoretically.

why do you go to star bucks? the coffee is not the greatest coffee in the world. you go to for the experience. a physical location to go to. >> we get the idea, rocco. it's an interesting idea, stacey. >> i would jump in and say that technology is not always the savior, so if you look at a company like jcpenney, ron johnson is bringing in technology, talking about virtual checkouts and things like that. i think the bottom line is in retail, especially in the department store space, we're just simply overstored. the wave of closings we saw post-2008 is not enough. >> i think that the issue here is what you're selling. you're going to have a very successful retail operation that you can then put online.

it's not necessarily about the technology. it's a sense that you can sell to other people. >> you're right, and that's the thing. apple has -- they have something different. they have great products and they have an experience they put together in the store. that's why they're successful. lulu, an exclusive brand, a lifestyle brand. peel want to be part of that, so they go there. starbucks, the sail thing. so that's what needs to happen in the next stage of evolution, is what is our thing going to be? what is our experience going to be? and the one to look out for is best buy. if there's anybody i'm going to turn bullish on, it's them. something went under the radar earlier in the year over there. they hired a guy named steven gillette, a vp and ceo of at starbucks. they hired him as a president at best buy and that guy is basically running the show. he's doing a lot over there. and he's a tech guy. he's on the board of semantech.

he thinks with a tech mind, not a retail mind. it needs a tech-oriented person, not a retail person. >> in the meantime, i think it's important to mention, for example, how people have made serious money in fashion when people get the stock right. i'm thinking of michael kors at the moment. i'm thinking of the gap. you make serious money on just getting what peel want to buy. that color, for example. how ridiculous was that? >> i first of all would disagree on best buy. not a fan. i still think they have serious issues ahead and a new ceo who's testing the waters here. but i think that's true, simon. we've seen new concepts. we've seen lulu, as you just mentioned, which the consumer wants. they have yoga classes in the stores, which brings you in. we have michael kors. the accessories business is doing extremely well. there are certainly retailers out there that are doing it right and have the right product and therefore the consumers will

come in. >> we have to end it there, but i just want to ask you, as michael kors is selling so much of his own stock, is that a significa signal that now is a good time to sell it too? >> michael kors' business, they just announced that earnings will be better than expected. their comps are incredible. so it's hard to say that the business is slowing down. yes, there's some insider selling. but the business is on fire. >> okay. guys, great conversation. thank you for joining us. another market flash here. this time within the electronic manufacturing space. that is kind of ugly, courtney. >> it sure is, carl. jabil circuits down about 9%. modest revenue growth. but what really is the problem is the weak current quarter forecast. they're worried about demand. also getting a number of downgrades today. down by more than 10% at this point for jabil circuits. >> in general, tech is not having a good day. the nasdaq weakness far

outpacing either the s&p or the dow. when we come back, the latest volley in the tablet wars. barnes & noble looking to undercut amazon with a look at two new tablets. how many start-ups succeed, how many start down and how you can tell the difference when it comes to possibly seeking out the next big investment.

barnes & noble taking aim at amazon and apple with the introduction of two new nook tablets just in time for christmas. john has the details. >> barnes & noble just took the wraps off these new nook tablets, really competing with the ipad, but also amazon's kindle fire lineup. i think the most important thing about this launch is what it does to the market for every tablet that's not an ipad. amazon, of course, pushing its

seven and nine-inch fire hd tablets. perhaps more significant will have the first windows 8 tablets out. what these nooks do is come in at $199, which is the price point for seven-inch tablets that amazon has established with the fire hd. but then at nine inches, they're coming in at 269, trying to undercut amazon a little bit on their larger tablet. but not only that, these nooks will not have ads on the opening screen. amazon, by default, will have ads on the kindle fire screen. you have to pay $15 to get rid of those ads. what this does is set the consumer expectation of what price they'll have to pay and perhaps what features they'll get for a nonipad tablet. the margins here are practically zero. we know amazon has said they're not looking to make money on hardware. barnes & noble following suit here. we're getting competition on price, not features. barnes & noble is leaving out

cameras altogether. apple has cameras on the front and back on the ipad. amazon has a camera in the front. barnes & noble is saying no cameras, we're just going to focus on the media end. as far as other stocks, microsoft, you definitely got to take note if we're looking at those tablets coming out. how are they going to compete with these kinds of price points when you have multiple tablets setting that expectation. carl? >> you said amazon's tablets actually do have cam cameras. how does that stack-up in terms of the price point? if i'm a couple and i don't have to pay that much more, why not just get a camera and so why buy the nook? >> well, it does come in a bit cheaper. if you're not interested in holding up a tablet and taking a picture -- i don't know if you've seen people doing that, i have, you might have your own feelings about how odd that looks. some people don't care about taking a picture with a tablet. they've got their phone for that or maybe an actual camera and they don't want ads. if you consider all those things, the $269 price point and the lack of ads, there is a

customer who might like this, particularly the folks who already have the nooks and like the reading focus with the tablet that those bring. >> all right, jon, thanks for that report. we're now joined by harry mccracken, the editor at large of "time" magazine joins us on the newsline. good to speak with you. does barnes & noble have a chance? they have placed the largest device order ever and expect market share growth by this christmas. >> it's interesting to see if in the tablet market, they seem to be doing okay. they're the ones with content. amazon has always been good at content. and they do look like pretty come ppetitive devices backed u against the amazon tablet. >> do you get the sense that there is truly a customer that wants the no frills reader, they're not interested in apps, they're not interested in the camera.

all they want to do is read a book, and is that enough? >> i think that is an actual market. barnes & noble is not targeting the gadget enthusiast who likes lots of features. they're going after mainstream americans, a lot of whom are women. it's about the reading experien experience. they're substantially lighter than the amazon tablets. if you leave out the camera, you can make the device weigh less. and they're a lot lighter than ipad since they're both smaller. they're aiming something which feels good in your hand and is easy to hold for a while. >> i do wonder whether or not you think a coupnsumer expects some features other than the ability to read. are these overpriced? >> barnes & noble does have an app store so you download games and other stuff. they have a web browser.

so they don't have the wealth of applications that are available to the ipad. and i don't think they claim to. but there are things you can do besides read. barnes & noble just launched their own video start. up until now they've been relying on net politics and hulu and now they'll have their own movies and tv shows, which is another way for them to monetize these devices. >> it's funny how harry says yeah, they do have an app store. because i don't think many people realize there are actually 10,000 nook-specific apps on the nook app store. although that's a fraction of what obviously amazon or apple offers. har harry, once the ipad mini hits the mark, is this just not even a discussion? does the nook have a space still to operate in? >> assuming that the apple is about to, it's beginning to be a challenge for everybody because the ipad is the only tablet that is the ipad and it has the most

apps and apple is likely to nail the user experience. so it will be tough for everybody. but at least barnes & noble and amazon have a head start in that they've both been doing tablets for a while and have built up a customer base. have kind of an identity as content experts and book experts and it will be a challenge for them for sure. >> harry, good to speak with you, editor at large, time magazine. >> here is a question. do you hate your cubicle at work? do you long for a more stimulating work environment? we don't. we're perfectly happy here. >> very happy. >> we did find one that might not cure for your cubicle fatigue. we'll find out what that is after the break. rick santelli, his cubicle is the size of the cme floor is working on the next hour of "squawk on the street." >> it is a great place to have the cubicle. you can learn a lot about a person by the company they keep and also learn a lot about politics by the investments of

their base. we're going to talk about that and how it relates to private equity at the top of the hour and then at the bottom of the hour we're going to talk a little high frequency trading, algorithm trading and whether there is any significant benefits. have you two great packages today. tune in. when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this.

the generation holding off pieing homes and giving rise to car sharing programs spered the 21st century workforce and shaking things up in the office space. a new article in the harvard business review says the co-working spaces are popping up in cities across the country and demand is on the rise. the author is ann kramer, a harvard business review contributor. thanks for being with us. >> great to be here. >> this is interesting. you have a start-up, you go into almost like a hive, incubator type environment and you spent time in one in new york city. >> exactly. >> what is it like? >> it is fantastic. my expectation was i would go in and it would be 20 somethings. it is not the case. it is people who are seasoned professionals, former bankers, ad executives all of whom said there is no more security. there is no more protection in my job. i need something to take care of

myself so they go to these crab active dynamic spaces. >> if you're working on your own thing, what value is there in sharing anything with anyone else? what benefits do you get other than the physical space of the place to work? >> it creates a sort of collaborative network. there is a soberologist at princeton who has done research around entrepreneurs and innovation and what he found is the broudser your network of context the more innovation you will actually have. in normal companies you are working all in the same silo and don't have a chance to grow. in the co--working spaces you may be working with someone starting a finance company and someone else who is a graphic designer. it is fantastic. >> not direct competition in other words. >> no, no. >> and even better that you have the diversity of industry? >> you have diversity of industry, the skill set, the built in resources that are powerful, and it creates a real opportunity for entrepreneurs. >> we should mention in new york

we have a very thriving technology industry based around places like general assembly similar to what you're describing there and this cooperative element is vital in borrowing building blocks from one another from which they believe they could become billionaires in the future. >> absolutely true. the thing is it is not just in new york and the silicon valley. it is happening in denver, austin, kansas city. demand is expected to increase 40% between now and 2013. >> how do you make money out of it? can you do it from real estate or is it always about the individual that sets up that cooperating environment. >> there are to models. the people are now collaborating with giant corporations to figure out how to replicate them in other cities. they make money one way and the entrepreneur dreams of the next facebook. >> if you're starting a business, it could be a lonely proposition if you're doing it at home. >> totally. >> the process of going to an

office where others are doing the same thing must be worth something. >> it is worth a lot. it creates a balance, an energy, and gives you a purpose if you are alone you do feel isolated. >> you say demand is rising 40%. >> 40% by 2013. >> are we topping out here or do you think it is just getting started? >> i think it is just getting started. i think we're in a giant paradigm shift as we move to a freelancer economy, i think it is a whole new ball of wax and i think corporations should pay attention. >> fascinating and i am sure anyone interested or thinking of or already in a small business. thank you very much. >> we have an update on the big movers next.

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introducing the entirely new lexus es. and the first-ever es hybrid. this is the pursuit of perfection. . tomorrow on "squawk box" larry summers, former counsel and honeywell chairman and co-david cody and tom stem berg, perfect guys to talk about the economy. dow is down 50 points. this will color the coverage on fast. >> definitely all over the market. the nasdaq is down by more than 1%. we have wilbur ross to talk about the new joint venture to get in on shale in china and paul hickey and what to expect with earnings season around the corner, how much to revise down or lower. >> we'll see how europe closes. >> europe has not recovered on wall street being flat. we still have heavy losses in europe. >> see you in 30 minutes. if you're just joining us, here

is what you may have missed early on. >> welcome to hour three of "squawk on the street." here is what's happening so far. >> i think the fed maybe pause it can't do otherwise has told the congress we're going to buy your bonds no matter what, and i think that's keeping the pressure off the president and keeping the pressure off the congress and it is not a good situation. >> we think that qe3 is good for financial markets in the short-term. it is building a bridge. we all are very concerned about what the destination is, what does this ultimately lead to? >> came out and said the same thing, we're not going to reduce or eliminate the greek debt. forget about that. they need to be concerned with what they committed to. >> research in motion, it is an interesting chart. >> interesting in that it is so bad interesting? >> you know, depends which -- it is very similar to the spanish

bond yields and depends whether you go to the end of the chart and go, wow. >> the right time for this ipo because the country is very well perceived by the investors. >> our business is only going to work if we're putting content in front of our users that they want to see and that they engage with. >> good wednesday morning. we are live here at post nine at the new york stock exchange. check on the markets after the worst day in three months. continued selling here. now down to 1433, s&p off eight points, dow down 30 points. it is the comp getting hammered, the nasdaq down almost a full percent, weakness in the big names of course apple among them

and rim trading higher after goldman raises the expectations and sandisk hit with a down grade after a market perform at jmp securities citing weak innocence computing trends and supply constraints. 40 days until the election and one week until the first presidential debate and mitt romney's campaign is heating up. we'll have the policy director joining us live with an update and the ceo of twitter speaks out about the possibility of taking the social giant public and our one-on-one in a few moments and how the nation's corner office feels about the economy and what it means for capital spending and hiring and the ceo of the business round table here with rather sobering details and the dirty little secret about start-ups. we'll tell you what the venture capital industry does not want you to know regarding success and failure. that's coming up in the next hour. first we'll start with

politics. 55% of those surveyed in the latest poll say the economy is worse than it was four years ago. the poll did not indicate a clear majority for the presidential candidate who would do a better job of fixing the economy in the future. the poll voters said they want the candidates to provide more details on how exactly they will improve the economy. lanny chan is policy director for the romney for president and joins us from campaign headquarters. good to have you. welcome back. >> good morning. >> i am sure you're familiar with the poll numbers and a lot of others who are looking for a reset from the romney camp. to what degree does that involve policy as we get closer to the debates? how is policy within the camp evolving? >> policy is a big part of this obviously and governor romney has been inkred apply specific regarding what he would do with the economy. he talked recently about the plan for a stronger middle class and how we can do things like get towards energy independence by 2020, how we can advance trade relationships that work for america and how we can cut

the deficit and champion small business. i think you have seen a good amount of policy from our campaign and i expect over the coming weeks you will be hearing more. >> and people obviously will be looking for specifics. for instance, i know i am not going to get you to talk about what specifically or how the romney administration would make up for lost revenue, but when it comes to questions like get asked a lot in business circles like the mortgage interest deduction, can we take that off the table or call it safe? >> i think what governor romney said is first of all he is not interested in raising taxes on anyone, particularly during this difficult economic time. i think particularly for middle income taxpayers there are priorities like a tax priority for homeownership that is quite important, but the reality is if you're going to get to tax reform, which we're committed to doing, you have to look at the entire scope of tax expenditures and that's something that we have said repeatedly. ultimately, this is about leadership and what candidate is going to lead america toward a

better business environment and more job creation and that candidate is mitt romney. >> obviously since the video from boca raton hit the governor tried hard to create a sense of empathy. today in high he says in his words my heartaches for those struggling. does any of that reflect in policy? is there a push to make his proposals for lack of a better word more compassionate as we get into the first debate? >> ultimately what the governor said today is true, the way our country ought to measure compassion is not by how many are on food stamps or welfare but how many we can lift out of poverty and that's why he has a plan to strengthen the milgsds middle class and higher take home pay and more quality jobs and it ultimately is how as a nation we can show compassion by creating the jobs and opportunities people need to succeed to rise out of poverty, to come into the middle class and have a secure economic

future. >> today as i said he is in ohio and we have had some reports of gop operatives worried about the state in terms of polling and i know it is not your area per se but one reason they cite for weakness towards the romney campaign has been the success of the auto bailout, and that op-ed will live on forever, lanny, when he wrote let gm go bankrupt. is there any attempt to back off that position or reverse it somehow? >> you know, let's not forget, that the auto companies did go through bankruptcy. it was president obama that led them through bankruptcy. let's not forget secondly that taxpayers are still on the hook for a $25 billion loss out of an $85 billion investment and let's not forget what you had over the last few years is government policies out of the obama administration that will make the auto industry less competitive in the long run because what they have done is made it harder to manufacture in the united states and harder to create jobs here and if we're going to have a u.s. auto industry that is sustainable in

the long run, what mitt romney is committed to, we have to change policy and that's what mitt romney will do. >> the argument might ring hollow to someone who is an auto worker in ohio who is suddenly getting more hours, right, the overtime that he hadn't gotten the last three years. >> well, ultimately that's want because of what the president did. we don't believe it is because of what the president did. we believe it is because of the resilience of the american people. the question is what's going to get the auto industry steady for the long run. the answer is not increased government involvement. it is policies that will create greater job creation and greater manufacturing in the united states and those are the policies we believe that governor romney and ryan are advancing during this campaign and policies they will put in place when they're in the white house. >> there is a poll, 87% of likely voters say the economy will be an important factor in their decision when they vote. obviously not a surprise. when you have confidence up like it was yesterday, you get home prices that are improving. we got decent numbers today. the market today aside has

obviously been strong for the quarter. you have gas prices coming down. are there policies, will we be hearing about positions that argue they could have done even better than all of those things doing right now? >> well, look, this recovery is the weakest recovery we have seen in modern history. you still have 23 million americans struggling for work. you have 47 million americans on food stamps. the reality is that the obama campaign can try to paint whatever picture they want to paint. the reality is that americans are not interested in having another four years like the last four years. they're interested in a change, and that's precisely why we believe this election will focus on the health of the economy and will focus on who the better candidate is to lead our economy going toward and it is precisely why we think governor rom in i and congressman ryan will be successful. >> before we let you go, are you in the depths of debate prep? how is that going? ? we are preparing for that debate next week and looking forward to it. president obama is a formidable

debater and has a lot of great experience and a wonderful speaker so we'll go in there prepared and i think we feel really good about where we are right now >> nice job managing expectations. look foward to wednesday night. let's get to the cme in chicago and rick santelli and the san telly exchange. surprising facts about bain capital's beneficiaries. >> yes. viewers, listeners, you now have a clue. we'll indirectly talk about bain capital. before we go there we'll talk about private he can it i in general and the tax code. bain has been vilified and to some extent maybe the entire private equity business has been vilified a bit and what is at the epicenter is a bit convoluted. it is about tax code. the tax code is horrible. being in the gray in tax code is what businesses do, what accounting firms do. that's just the way it is. if people don't like the behavior of navigating through

something so crazy they ought to change it. to the end there was an article written by d. roy murdoch called look at who parks their cash at bain. when with i read this, seriously, i was flabbergasted. maestro, put the names on the screen, please. here are some of the entities and they're at the epicenter of the democratic paste. look at it, calster 1.25 billion, illinois municipal retirement fund, the list goes on and on. they're public pension funds. this is the core of the democratic party. alongside d. roy murdoch writing this article there was a yun man that did research and he had some interesting things to say. let's play brett. >> my research with them indicated that many of the people that are cheering for mr. obama's election are benefitting from bain's business acumen. the pension funds are aggregating the nest eggs of

many of their union employees such as firemen, police men, teachers, who bosses are largely bashing the man and the company that is stewarting their capital and making sure they have enough phone for the retirement or if they get checks that the checks come in the mail. >> i think it is very interesting what brett is saying here. listen, it is not my job to tell anybody listening or viewing, you know, who is right and who is wrong. i think there is an addage that really plays well. when you want to really find out the truth, they say follow the money. in my opinion you should follow investors to find out what's really going on. this is a political ploy. it isn't about private equity or ban capital. they are making tremendous profits as evidenced by that list and they quoted somebody from calsters who talked about it has been one of the most profitable private equities investments in their portfolio.

wake up, america. if the issue is tax policy, keep it on tax policy. it shouldn't be about bain capital who helps people. back to you. >> i am shocked, rick, that there is insin severity in a modern political campaign. good stuff. >> i am, too, and even though there is and everybody knows it, it is no reason for me to stop talking about it. >> exactly right. see you in a few minutes. want to take you to live pictures of protests outside the united nations here in new york city. iranian president mahmoud ahmadinejad is speaking before the general assembly and it has become a tradition for him to set a wide ranging debate about what he says when he does address the assembly. if we get more details we'll bring them to you. that is a live look at what's happening awfully close to the u.n. the interview twitter is waiting for. dick costello with julia boorstin speaking out on everything from mobile ads to going public. what he has to say when we come back. ♪

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ever fins facebook went public they have been wondering what it means for twitter and julia sat down with the ceo at the headquarters this morning and brings us the details. good morning, julia. >> good morning to you. i spoke to dick costello about the ad business, his focus on maintaining the user experience and also where he is willing to leave money on the table.

we kicked off the conversation talking about whether or not he plans to bring the company public. >> the twitter ipo question, it is not something we're focused on right now. i think about ipos as a mechanism for financing the growth of the company and when i think about the growth of the company right now, i am focused specifically on user growth, user engagement, and growing the team and recruiting the best team internally. there will come a time when we need to start talking about what's the best way to finance the future growth of the company and then we'll have that conversation. >> will that time come in 2013? >> i am not focused on what the date for any of that financing is right now. >> are you under pressure based on a number of shareholders or any of these other regulatory factors to go public at some point? >> no. the interesting thing about the regulatory change in the number of shareholders is i think it provides private companies with a lot more flexibility and i think that's all fantastic.

that doesn't have any bearing on the decision we would or wouldn't make as to when to be a public company. it will be based on a decision we make about when we think the timing is right for us and want any sort of regulatory issue or market timing issue. >> how is facebook's ipo debacle changed your perspective on going public? >> nothing external to the company has had any bearing on how i think about when to take twitter a public or not to. >> if going public in the near future isn't happening, is twitter a take overtarget? >> we have every belief in the world and when i say we, i mean all of us here inside the company. in fact, not just the employees of the company, the board of directors, we have every belief that we are building one of the lasting digital technology companies in the world and that we will be a permanent member of the digital constellation. >> does that mean you'll be an independent member of the digital constellation? >> we have every belief we will

be an independent company and that we have got the engine that we need to be a successful independent company. >> for the right price would you sell to an apple or google? we have every hope and belief that we will be a successful independent company. >> twitter's future hinges on its ability to ramp ad revenue. he tells me the biggest challenge is internationally where he needs to expand the platform beyond just a couple of countries where it is now to really match the number of international users that twitter has. you can find much more of the interview on meet the money. >> like watching a mental duel between you going over those issues. don't go away. stay there. for making money to going mobile we'll talk more about this. can twitter make it work or could it become the next facebook if it were to go public and it is hard out there for a ceo, the president of the business round table will tell us how hard and if the corner office expects things to get better any time soon.

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the recent profile redesign has them looking for like facebook but would they follow in the foot steps? julia boorstin spoke with him earlier and joins us now with the editor and chief of the verge. good to have you here. julia, i want to throw it back to you first having talked to him firsthand. his focus on the user experience, how do you couple that? how do you maintain that sense of purity about the product while also introducing things that feed revenue? >> it is all about the ad model, and he explained to me if the ads work right, then it is really a virtuous cycle and they only want to show ads that they will engage with. they only charge if they tweet or retweet or click on a link on an ad. people are only paying if the ads work, and that's something that benefits twitter as well.

>> josh, i just got a note sent to me ironically on twitter from someone that said never have, never will click on a twitter ad. i unfollow anything that goes to one. keep it coming and i will find a new service. do you think that sums up a lot of users believes and opinions? >> no, i don't think it does. first off, theres no other service like twitter in the world really. certainly not for most of the users, and i think they will be a little more clever with the advertising. i don't think it will just be a question of, hey, we're forcing you to click on something and that's how we make money, and i think dick in fact talked about coming up with ways to really utilize what twitter is for advertising, so i don't think there is another service to go to, and i think they are just starting to figure out how to advertise on twitter. >> how do you think -- julia, go ahead. >> we have to remember that people actively decide to follow brands on twitter. i follow starbucks. people may follow nike.

there is this automatic ability to interact with fans of your product or brand and it naturally creates a good environment for the brands to communicate with consumers. >> good point. it is active. you're following them, obviously more receptive to getting their information. josh, how do you think the experience will change? if i fast forward five years and into twitter, how will it look different than now? >> well, i am not psychic, buck i can say they have to fine line. they are not just this enterprise and not just this advertising platform. they're also becoming this weird sort of almost public service where you expect to get news and breaking news and emergency information on twitter and when something is going on in any neighborhood and i don't know if there is a car accident or fire, i look on twitter to see what's happening. i think they have to walk a fine line in terms of changing it for the users because they have come to rely on it almost like a public service. >> julia, he would not go there

in terms of your questions, your line of questioning regarding going public. he says the facebook experience has no bearing on their thinking. i wonder if you really believe that. >> he insisted that nothing like the facebook ipo is impacting his decisions at all. i think there are a lot of reasons for a company like twitter to be very weary of going public, one of which is the fact they want to really build out the ad model and really roll out ads slowly without upsetting users as was just mentioned, so if they're not under pressure from wall street they can take their time and ramp revenues slowly and carefully and if you really did make a point of emphasizing they are being cautious about how and where they introduce those ads and once you're public, you really don't have that option. >> yeah. josh, i know you're not psychic. i will pretend you are for a second. public offering or buyout? there are companies with an awful lot of cash and everyone has their price. >> i think that i believe that when they say they really want to take the company public, and

i think to the point you were just making, you know, it is not that twitter is going to change the internal strategy, but the market is watching companies like twitter and saying how much more careful do we have to be watching these companies go public? i honestly believe they're not headed for a take over. i think they really to want take it public and pick the right time and have the right streg or investors won't get behind it. >> really great stuff. julia, thanks for bringing it to us in the first place. thanks a lot. straight ahead, santelli will take on high frequency trading and say why trying to limit it could do more harm than good and of course europe is about to close and they have not reversed things since a weak morning. we'll talk to simon in a moment. at optionsxpress we create easy-to-use, powerful trading tools for all. like our all-in-one trade ticket. we put strategies, chains and positions all on one screen. start trading today with

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chase allows us to buy capital equipment to be able to manufacture in the states to the scale we need to be a global company. with a little luck green toys could be the next great american brand. find what's next for your business at chase.com/mainstreet the first time in a long time europe is driving sentiment at least here in the states and simon will walk us through the map. >> today is the two-month anniversary of mario draghi, the head of the ecb, saying that he would do everything to save the euro and on this anniversary you have had an explosion of selling in europe as you can see and that is deep red. look at the figures on the screen. the images we have had last night from spain and then this morning from greece have clearly indicated that the rubber is hitting the road. it is now up to the politicians

amid the prospect of social unrest to cut the over spending that has lasted for years and years. what is important about the price action here is that you have failed to see any recovery on european markets when wall street has opened broadly holding, i know we're down but not falling out of bed, so look how spain continued to fall throughout the session. you have not had that stabilization coming from wall street and that's very, very unusual. you can see it again in italy, again, the substantially lower there and falling throughout the session as you can see, and if you look at the top 50 blue ships in the eurozone, the euro stock 50, again, you can see the way in which they continue to fall throughout the session. i would turn around and say on this two-month anniversary remember where we're coming from and it is profit taking on a very strong rally. take a look at these top 50 blue ships and you will see with today's losses that we are still in that two-month period up over 11%. other people on the network have

suggested this is much more major and that the starting point of something that really will capture our attention, notably michelle cabrera and we'll come back to that in a few moments and look at what's happening within the individual stocks. 95% of european stocks in the top 600 companies, 95% are down. the banks are leading the way. the heavyweight banks, look where we are in germany. look at france. it is a similar story. you know they're heavily invested in peripheral europe and credit down 7% on today's session alone and the italian banks are also in negative territory. where the debate perhaps is focused is on the bond market and what is happening in spain and what point will we see a blowout in yields? i don't think given where we have come this was the point making to michelle earlier, that is a huge clawback. however, she thinks it is the start of something important. art is here suggesting make a constitutional crisis in spain and we will watch and see

exactly where we've taken moving forward. have you seen it at the shortened and the yields coming up slightly. moment is important for two reasons. first of all, the spanish will come through with the budget and that's important and we discussed that through the show and tomorrow is also when the fragile coalition in greece will talk about the plans there to save the 12 billion euros that the rest of international community is demanding of them. will the coalition endorse it? will they hang together? interestingly enough within all of this the flight to safety, the buying of the german and the french bonds, we actually had a german auction that fails today, 36 and a third had to be reabsorbed by the state because the rates there are so low, 1.5%, and you can see the rates continue to fall there as people go into the german market and on france and this is real key. the yields are falling in france as well. it is still coupled with germany. it is still a safe haven in which people flow.

that is tested on friday and when francois elanz will come through with the budget. he has to take it somewhere in the region of 30 billion euros. the question is if you took the 75% tax on millionaires that he is doing what is he able to draw back from the labor unions in order to further bring that deficit down? that is a story for friday. a huge one. >> still have to get through today. thanks a lot, simon. crude is still below 90. >> still below 90 and the problem that is simon outlined so well are definitely traders are the floor are talking about and impacting negatively the oil price. we're seeing oil prices that already slipped below $90 a birl for the first time since early august fall further after the data we reported earlier on the oil inventories and also on oil

demand over the last week here in the u.s. that has really helped to put oil prices here, the wti contract, for one, in correction territory. we're seeing a slide in oil prices that we have seen since september 14th of over 10% going to the lows of the session today which are below $89 a barrel. we did find the distillate demand last week dropped by about 9%, almost 9% just in one week's time and this is the second decline in a week. we're looking at the weakness in distill lat demand having an impact here on the oil price. we're also watching what has happened here with imports because imports have plunged and as we have noticed the inventory is down well. really, it seems the demand that is overshadowing what we have seen on the supply side and that's a big reason we're looking at oil prices here with $89 handle. back to you. >> sharon, thank you so much. bring in mary thompson on the floor of the exchange with a look at what's moving and a little looks like sector rotation to some degree here. >> a little bit of that, carl. we are seeing the markets, they

look like making a bid for recovery right ahead of the european close. we saw tech come off its lows as you have seen crude oil come off its lows as well. that provided some support. we have slipped back. what we're seeing today is persistent concerns not only about europe as simon pointed out but also about the economy here in the u.s. and new home sales were less robust than expected and also a diesel demand declining for the second week in a row as sharon point out and also putting pressure on the markets. tech stocks are leading the way today. materials are weaker as well as gold has fallen although it is off the lows and energy consumer discretionary led by the home builders and financials are the big sectoring moving to the downside. on the plus side we have seen investors continue to take a defensive position and utilities benefitting from that and strength in health care and consumer staples. the vicks yesterday up 9% and continues to move higher. this is a measure of what fears in the market so again the increased or revived concerns

about europe and the u.s. economy playing into the gain we see there. touch on the home builters. the etf, the homebuilding etf is having the worst day in three months. you can see it is down 3.4%. august new home sales coming in weaker than expected and look at how the home builders are reacting. for the most part the home builders have been a bright spot over the last year because there are signs of strength, a bit of a we round in the housing market and today's data casting a pal over there and those are lower as well. the dow is off just about 29 points. back to you. >> see you soon. mary thompson here at the big board. rick sante in chicago looking at the potential dangers of curbing high frequency trading. this i got to hear, rick. >> absolutely. the british government, carl, in pursuit of trying to find out

more about algorithm trading, high frequency trading, commissioned the foresight project and we have a co-author, maureen o'hara and chairman of the board of itg in the business of sellingal goe rhythmic formulas and software to business and traders. welcome, maureen o'hara. >> hi, rick, nice to be here. thank you. >> maybe you can tell us a bit about the foresight project and what it is set out to do and what findings we ended up with. >> rick, i think the impetus for the foresight project was really the interest in europe and there is not a day goes by that we're not seeing an article about germany and france and others wanting to curb high frequency trading and the various things that have gone along with it.

i think the british government really wanted to try to get some perspective on what do we actually know about how computer trading has affected markets? so they commissioned a huge project that involved dozens and dozens and may even be 100 people involved in writing papers and trying to look at every aspect of computer trading and then the end result was a series of i think six chapters, and they try to summarize what we know about the effective computer trading on markets. >> now, if you had to synthesize into a couple of easy buckets what you found out and what is in those chapters that describe the findings, what were the two most important issues in your opinion? >> i think the first thing to understand is that virtually every academic study has shown that markets are better in terms of lower transactions costs,

greater efficiency, smaller price impacts, than they have ever been, and most of that really can be attributed to the use of computers and more algorithmic trading and the dreaded high frequency guys that brought tremendous value in terms of what they have done to transactions, costs and liquidity and efficiency. that's point one. point number two, and this is part of where i spent a lot of time on my work, there is a variety of things that have been proposed as ways to, quote, curb the markets, and we went through virtually all of those proposed changes and there are some that make great sense, particularly for europe, things like circuit breakers, that are done not just on a market by market basis but more broadly, issues like that, but there is an awful lot of things that have been proposed that make no sense. things like notification >> we're running out of time

here. we will have you back because i think this is important. down here they love computerized trading. what they don't like is some of the speed associated with it and we'll bring you back and discuss that in more depth. carl, back to you. >> rick, thanks so much, rick santelli in chicago. if the corner office is worried, should you be worried, too? why the nation's executives are feeling more glass half empty lately, the business round table survey result when is we come back. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. if we want to improve our schools...

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europe rearing its ugly head doen and dragging down stocks terribly over there and adding to woes here and we found names you should buy on the pullback and why now may not time to short the year's hottest trade. with stocks up 13% since early june, we have a top fund manager revealing the one thing that could kill the rally and it is not europe. tune in noon eastern time. back to you. >> see you in a few moments, michelle. the results of the business round table's ceo economic outlook survey are in. want to take a look at what they might expect in terms of sales six months out and spending six months out and employment for the next six months as well. joining us, john inglerr. good to have you back. >> great to be with you again. >> these are sobering numbers. >> they are. >> looking at sales to start with back in the second quarter you say do you think sales six months out will increase,

decrease or stay the same. it was 75. now it is 58. capital spending, it was 43% expected in increase, and now 30. then employment finally, it was 36, down to 29. what's going on? >> i think the news you're reporting out of europe, the slowdown in china, the uncertainty in washington, think about it. just a quarter ago three and four were thinking sales higher and now barely one and two. it is changed. this is the third biggest drop in ten years, the lowest in three years, and so it is what we call sharply lower expectations and reflecting that concern that's out there, and even drop the gdp predicting at year end 1.9%. that's not going to put many people back to work. >> right. we know they have plenty of cash and if they don't, borrow it cheap. >> right. >> relative to other economies around the world, north america pretty strong. you have consumer confidence on the rise. gas prices dropping. there must be something they're

seeing the rest of us aren't. >> i think the consumer confidence is nice to see those numbers coming back. they're still pretty low. depends where you start from. these are actually starting a little higher and dropping off, and i think there is just this clear uncertainty about what is lying ahead here in the u.s. we have tax rates that expired at the end of 2011 that haven't been addressed. we're now having another set of tax rates that will expire at the end of 2012. we have that debt ceiling hanging out there. we have a short-term budget deal but sequestration looming. then you have what i call not a fiscal cliff, a fiscal everest staring us in terms of the long-term entitlement reform and major tax reform that has to happen, so people are sitting on cash and they're concerned. >> i wonder, these are quarterly surveys. is there something endemic to election season where there is obviously uncertainty about who is going to be president in the next three months or at the same

time, for instance, last year we went through a debt ceiling exercise. did we see a similar dip like this? >> no. we have done it for a decade. i said this morning on the conference call that in december it will not beginning of the second decade, so lowest level in three years, the third sharpest drop since we have been doing it over a ten-year period and it does not move in tandem with elections, so this is a little different, and i think it reflects the magnitude of undecided questions that are pending, and i think even though consumer confidence, it is nice to see a little movement in housing, there are signs, i mean, this is an economy that wants to i think move. this is an economy i believe that could lead the world back, but we better -- it is sort of like the nfl, if the players don't know how to play the game if it is going to be refereed. in washington our referees are on strike. they're not getting much done. >> let's hope it doesn't get quite that bad, governor.

scary analogy. it is always good to talk to you. see you next time. >> thank you. when we come back, every 20 something's dream, start a tech company, become a billionaire over night, exactry. turns out it is a lot harder to do than some venture capitalists would like you to believe. what the industry is not telling you after a break.

these days it seems any entrepreneur with a clever technology is sitting on a gold

mine. that's what silicon valley wants you to think. it is likely to turn out to be fool's gold. they're finding three out of four start-ups fail. the person behind the finding is a tech start-up veteran and joins us this morning from newton, massachusetts. good morning to you. >> good morning. >> this is fascinating given what the national venture capital association likes to say, but let's start with the definition of failure. what is it and how many new start-ups reach that point? >> so if you think about failure itself, a lot of people like to think about failure as a company declaring bankruptcy. that is certainly one definition of failure. the way we looked at it is that a company has not been successful if it hasn't been able to return at least a dollar for every dollar that's been invested. so if you were an investor in a company or started a company and you put $100 in and you got $75

back, that would not be a successful company. using that definition, go ahead. >> i was going to say your research shows that using that definition in terms of returning just plain returning investors capital, three quarters of start-ups in the united states do not do that. over what period of time? >> so a couple of qualifications. the first is that all of our research is based on venture capital funded companies. so if you look at the companies that have been funded by established venture capital funds, that's been the base we used and we looked at the data going back to 1990 all the way up to 2007, and the reason why we haven't looked at the last few years is companies take a few years to fail. so you can't really have a company that started in say 2010 and get an accurate assessment for whether the company is going to succeed or not because typically a receipt firm will give them enough capital to last for a year or two f across the

period what we have seen is that the failure rates, the number of companies in a portfolio that return that capital have been going up. in the last seven or eight years can has been the highest it has been. >> interesting. you also make the point that -- you make two points. one is entrepreneurs are often left on the hook because they leveraged their own bank accounts, their own households, to get these things moving and put it on credit cards and not solely rely ant on vc and they bury their debt quietly. what do you mean by that? >> when you look at the official numbers on failure rates, you get numbers in 30, 35%, something like that, and the reason is they look at companies that declared themselves either bankrupt or officially gone out of business. what a lot of venture capitalists do is they sell the company at a loss. sometimes they literally just sell the computers and the

furniture in a company and call that an acquisition. so that tends to distort the numbers and make the numbers seem lower than they actually are. the other big category that occurs is companies that just go out of business but remain as entities, so the walking dead. >> yes. we see a lot of that, too. it is fascinating stuff, not to say that we're saying these things are risk free, but it is good to keep note of. appreciate your time very much. >> thank you. >> when we come back, billionaire or not, should you get out and bring home the bacon as fast as you can? jane wells is squealing about america's favorite breakfast meat. >> this is a tease, this isn't the actual story? are we doing the story or teasing? >> i think you can go ahead. >> i am going to keep talking. we're talking food. it is my favorite subject. everyone has been talking about the upcoming bacon shortage. as i have been saying all summer

pork prices are expected to rise next year. hog farmers are slaughtering pigs early because it is too much to feed them. the turn could happen faster than expected. the american restaurant association report says hog weights have fallen below year ago levels suggested it has ended and pork markets are likely to make early bottom this is fall. they said pork and bottom in the same sentence. we encourage them to look for pork coverage. cover your bacon. where is the beef price? falling on word that they're buying less beef and the report says that won't last with limited supplies. expect record highs, new record highs for beef markets this fall into 2013. what about grains? that's cool. corn down to the lowest level since july and soybeans falling below $16. we have been hearing the drought may not be so horrible. the american restaurant association says grain prices could be nearing a bottom due to ever on all global supplies and they predict china will increase

the corn import from less than half a mintons to 20 million in five years. give me this. what about wheat? the report says wheat markets remain vulnerable. bake your cup cakes while you can. in this food report i scrambled to find some good news. the restaurant association has done a 180 on the outlook for chicken wings and it is more likely prices will go down than up. will you have wings for your sunday football game if you don't -- even if you don't have competent referees. back to you. >> jane, always good to have you here. i wish you could stay forever. we'll talk later on. in the meantime, keep the tweets coming. the wsj reporting people are spending more on the cell phone bills even as they dial back on things like dining out and new clothes. we're filling in the blanks. finish this sentence. to me my smartphone is more valuable than blank because blank. tweet us and we'll read your answers after this break. americo work hard for a better future.

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oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. now save 50% on banners. people are cutting back on the family budget but not the cell phone bills. we're asking you to finish this sentence. my smartphone is more valuable than blank because blank.

scott writes my mother-in-law. parker writes my smartphone is more valuable than gold because it keeps me connected with my kids and under hill writes more valuable than a time machine because my iphone 5 map app is prehistoric. let's get to headquarters, michelle, and the fast money halftime. welcome to the halftime report. i am michelle cabrera in for scott walker. four hours to go until the close. here is where we stand, negative territory not as bad as europe, though. the dow lower by 15 points, 13,442, the s&p lower by 6 points, almost half a percent and nasdaq by 25. earnings over hang, why earnings season could be a real buzz kill for the bulls. we'll talk about that and the short story on home builders, investors increasingly betting